<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
HADCO CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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PRELIMINARY COPY
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
<PAGE> 2
PRELIMINARY COPY
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
HADCO CORPORATION
12A MANOR PARKWAY
SALEM, NEW HAMPSHIRE 03079
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
To The Stockholders:
The Annual Meeting of Stockholders of Hadco Corporation (the
"Corporation"), a Massachusetts corporation, will be held on Wednesday, March 4,
1998 at 10:00 A.M. at 100 Federal Street, Boston, Massachusetts, for the
following purposes:
1. To fix the number of directors at eight (8) and to elect a Board of
Directors for the ensuing year.
2. To consider and act upon a proposal to approve the Hadco Corporation
Employee Stock Purchase Plan of November 17, 1997.
3. To consider and act upon a proposal to amend the Corporation's Restated
Articles of Organization to increase the number of authorized shares of
Common Stock, $.05 par value (the "Common Stock"), from 25,000,000
shares to 50,000,000 shares.
4 To ratify the selection of the firm of Arthur Andersen LLP as auditors
for the fiscal year ending October 31, 1998.
5. To transact such other business as may properly come before the meeting
and any adjournments thereof.
Stockholders entitled to notice of and to vote at the meeting shall be
determined as of the close of business on Friday, January 9, 1998, the record
date fixed by the Board of Directors for such purpose.
By Order of the Board of Directors,
JAMES C. HAMILTON,
Clerk
January 15, 1998
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STOCKHOLDERS ARE REQUESTED TO SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL
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<PAGE> 3
PRELIMINARY COPY
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
HADCO CORPORATION
12A MANOR PARKWAY
SALEM, NEW HAMPSHIRE 03079
------------------------
PROXY STATEMENT
JANUARY 15, 1998
Proxies in the form enclosed with this proxy statement are solicited by the
Board of Directors of Hadco Corporation (the "Corporation") for use at the
Annual Meeting of Stockholders of the Corporation to be held on Wednesday, March
4, 1998, at 10:00 A.M., at 100 Federal Street, Boston, Massachusetts.
Only stockholders of record as of the close of business on January 9, 1998
will be entitled to vote at the meeting and any adjournments thereof. As of that
date, shares of Common Stock of the Corporation were issued and
outstanding. Each share outstanding as of the record date will be entitled to
one vote, and stockholders may vote in person or by proxy. Execution of a proxy
will not in any way affect a stockholder's right to attend the meeting and vote
in person. Any stockholder delivering a proxy has the right to revoke it by
written notice to the Clerk at any time before it is exercised.
An Annual Report to Stockholders, containing financial statements for the
fiscal year ended October 25, 1997, is being mailed together with this proxy
statement to all stockholders entitled to vote. It is anticipated that this
proxy statement and the accompanying proxy will be first mailed to stockholders
on or about January 23, 1998.
The representation in person or by proxy of at least a majority of all
shares of Common Stock issued, outstanding and entitled to vote at the meeting
is necessary to constitute a quorum for the transaction of business. Votes
withheld from any nominee for election as director, abstentions and broker
"non-votes" are counted as present or represented for purposes of determining
the presence or absence of a quorum for the meeting. A "non-vote" occurs when a
nominee holding shares for a beneficial owner votes on one proposal, but does
not vote on another proposal because, in respect of such other proposal, the
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. The election of directors by the
stockholders shall be determined by a plurality of the votes cast by
stockholders entitled to vote, and votes withheld will not be counted toward the
achievement of a plurality. On all other matters being submitted to
stockholders, an affirmative vote of a majority of the shares present or
represented and voting on each such matter is required for approval, except that
the proposal to amend the Restated Articles of Organization of the Corporation
requires the affirmative vote of a majority of all outstanding shares of Common
Stock of the Corporation. An automated system administered by the Corporation's
transfer agent tabulates the votes. The vote on each matter submitted to
stockholders is tabulated separately. Abstentions are included in the number of
shares present or represented and voting on each matter. Broker "non-votes" are
not considered voted for the particular matter and have the practical effect of
reducing the number of affirmative votes required to achieve a majority for such
matter by reducing the total number of shares from which the majority is
calculated, except that broker "non-votes" have the practical effect of a vote
"against" the proposal to amend the Restated Articles of the Organization of the
Corporation.
Each of the persons named as proxies in the proxy is a director and officer
of the Corporation. All properly executed proxies returned in time to be cast at
the meeting will be voted. With respect to the election
<PAGE> 4
of a Board of Directors, any stockholder submitting a proxy has a right to
withhold authority to vote for any individual nominee or group of nominees to
the Board of Directors by writing the name of such individual or group in the
space provided on the proxy. The proxies will be voted as stated below and under
"Election of Directors." In addition to the election of directors, the
stockholders will consider and vote upon a proposal to approve the Corporation's
Employee Stock Purchase Plan of November 17, 1997. The stockholders will also
consider and vote upon a proposal to amend the Corporation's Restated Articles
of Organization to increase the number of shares of authorized Common Stock from
25,000,000 shares to 50,000,000 shares. Finally, the stockholders will act upon
a proposal to ratify the selection of auditors. Where a choice has been
specified on the proxy with respect to these matters, the shares represented by
the proxy will be voted in accordance with the specification and will be voted
FOR if no specification is indicated.
The Board of Directors knows of no other matter to be presented at the
meeting. If any other matter should be presented at the meeting upon which a
vote may be properly taken, shares represented by all proxies received by the
Board of Directors will be voted with respect thereto in accordance with the
judgment of the persons named as proxies in the proxies.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of January 2, 1998, the name of each
person who, to the knowledge of management, beneficially owned more than 5% of
the 13,095,982 shares of Common Stock of the Corporation outstanding at such
date, the number of shares owned by each of such persons, and the percentage of
the outstanding shares represented thereby.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS
- ------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
J. & W. Seligman & Co. Incorporated................................ 1,179,900(2) 9.0%
100 Park Avenue
New York, NY 10017
Horace H. Irvine II................................................ 762,422(3) 5.8
c/o Hadco Corporation
12A Manor Parkway
Salem, NH 03079
FMR Corp........................................................... 675,800(4) 5.2
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ---------------
(1) Unless otherwise indicated, the named person possesses sole voting and
investment power with respect to the shares.
(2) According to information provided to the Corporation by J.&W. Seligman & Co.
Incorporated, as of January 2, 1998, J.&W. Seligman & Co. Incorporated
beneficially owned shares of the Common Stock of the Corporation.
(3) Includes 79,355 shares held in a voting trust for the benefit of Andrea P.
Irvine. Mr. Irvine, who is the sole trustee of such trust and retains sole
voting power with respect to the shares held in such trust, disclaims
beneficial ownership of such shares. Does not include 167,160 shares held
in irrevocable trusts for the benefit of members of Horace H. Irvine II's
family. Mr. Irvine, who is not a trustee of such trusts, disclaims
beneficial ownership of such 167,160 shares. James C. Hamilton, Clerk and
General Counsel to
2
<PAGE> 5
the Corporation, Lawrence Coolidge, a Director of the Corporation, and
Gilbert M. Roddy, Jr. are co-trustees of these irrevocable trusts. Horace
H. Irvine II retains no voting or dispositive power with respect to these
shares. All voting rights under these trusts reside in Messrs. Hamilton,
Coolidge and Roddy, who have the right to dispose of such shares. Messrs.
Coolidge and Hamilton own 14,000 and 8,910 shares, respectively, as
individuals, in addition to the shares they hold as co-trustees. Mr.
Coolidge's 14,000 shares include 9,000 shares issuable upon the exercise of
stock options that will become exercisable within 60 days of January 2,
1998.
(4) According to information provided to the Corporation by FMR Corp., as of
January 2, 1998, FMR Corp. beneficially owned shares of the Common
Stock of the Corporation. Includes shares beneficially owned by
Fidelity Management & Research Company, as a result of its serving as an
investment adviser to various investment companies registered under Section
8 of the Investment Company Act of 1940 and as an investment adviser to
certain other funds which are generally offered to limited groups of
investors. Also includes shares beneficially owned by Fidelity
Management Trust Company, as a result of its serving as trustee or managing
agent for various private investment accounts, primarily employee benefit
plans, and as an investment adviser to certain other funds which are
generally offered to limited groups of investors. FMR Corp. has sole voting
power with respect to shares and sole dispositive power with respect
to shares.
ELECTION OF DIRECTORS
The directors of the Corporation are elected annually and hold office until
the next annual meeting of stockholders and until their successors shall have
been elected and shall have qualified. Shares represented by all proxies
received by the Board of Directors and not so marked as to withhold authority to
vote for any individual director or for all directors will be voted (unless one
or more nominees are unable or unwilling to serve) for fixing the number of
directors for the ensuing year at eight and for the election of the nominees
named below. The Board of Directors knows of no reason why any such nominee
should be unable or, for good cause, unwilling to serve, but if such should be
the case, proxies will be voted for the election of some other person or for
fixing the number of directors at a lesser number.
The eight nominees are currently directors of the Corporation and were
elected at the Annual Meeting of Stockholders held on February 26, 1997. The
nominees for directors and further information with respect to each nominee are
set forth below.
HORACE H. IRVINE II
Mr. Horace H. Irvine II, age 60 and founder of the Corporation, has been
its Chairman of the Board since the Corporation was organized in 1966, and its
Chief Executive Officer from that date until 1986. He is Chairman of the
Nominating Committee of the Board of Directors. He was President of the
Corporation between 1966 and 1980 and Treasurer of the Corporation between 1966
and 1984.
ANDREW E. LIETZ
Mr. Lietz, age 59, has been President and Chief Executive Officer of the
Corporation since October 28, 1995, Chief Operating Officer and Vice President
of the Corporation from July 1991 to October 28, 1995, and a director of the
Corporation since 1993.
OLIVER O. WARD
Mr. Ward, age 62, has been a director of the Corporation since 1987. He is
Chairman of the Executive and Finance Committees of the Board of Directors. He
was a founder and has served as chairman of the
3
<PAGE> 6
board, chief executive officer and president of Germanium Power Devices Corp., a
manufacturer and marketer of germanium semiconductors, since 1973.
PATRICK SWEENEY
Mr. Sweeney, age 62, has been a director of the Corporation since 1991, and
was President and Chief Executive Officer of the Corporation from July 1991
until October 28, 1995. He was Chief Operating Officer of the Corporation from
July 1990 to July 1991. He is currently a consultant to the Corporation.
LAWRENCE COOLIDGE
Mr. Coolidge, age 61, has been a director of the Corporation since 1995. He
has been the president and a private trustee of Loring, Wolcott & Coolidge
Office, a fiduciary services provider, since 1962. On August 1, 1994, Mr.
Coolidge became an associate of Loring, Wolcott & Coolidge Fiduciary Advisors, a
registered investment advisor.
JOHN F. SMITH
Mr. Smith, age 62, has been a director of the Corporation since 1995. He is
Chairman of the Long-Term Planning and Strategy Committee of the Board of
Directors. He has been the president of MYCOS International, Inc., a property
development corporation, since April 1993 and president of PerSeptive
Biosystems, Inc., a biotechnology company, since July 1996. In April 1993, Mr.
Smith retired as Senior Vice President and Chief Operating Officer of Digital
Equipment Corporation, a computer company, in which capacities he had served
since 1991. He began his career at Digital Equipment Corporation in 1958 and
served in various other senior management positions from 1976 to 1991. Mr. Smith
is also a director of Ansys Corporation, Instron Corporation, PerSeptive
Biosystems, Inc. and Sequoia Systems, Inc.
JOHN E. POMEROY
Mr. Pomeroy, age 56, has been a director of the Corporation since September
6, 1996. He has been president and chief executive officer of Dover
Technologies, a group of manufacturing companies and a subsidiary of Dover
Corporation, since 1987. Mr. Pomeroy is also a director of Adept Technologies,
Inc.
JAMES C. TAYLOR
Mr. Taylor, age 59, has been a director of the Corporation since December
3, 1996. He is Chairman of the Joint Stock Option and Compensation Committee of
the Board of Directors. He has been an advisory director at Downer and Company,
an investment banking firm, since 1995. He was a managing director of Burns Fry
Limited, an investment banking firm, from 1988 to 1994.
4
<PAGE> 7
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information as of January 2, 1998 with respect
to beneficial ownership of shares of the Corporation's Common Stock by all
directors and all executive officers named in the Summary Compensation Table set
forth below under "Executive Compensation" individually, and by all directors
and executive officers of the Corporation as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS
---------------------------------------------------------- ------------ --------
<S> <C> <C>
Horace H. Irvine II....................................... 763,422(2) 5.8%
Andrew E. Lietz........................................... 149,946(3) 1.1
Timothy P. Losik.......................................... 36,100(4) *
Christopher T. Mastrogiacomo.............................. 14,000(5) *
Michael K. Sheehy......................................... 5,250(6)
Richard P. Saporito....................................... 28,900(7) *
J. Stanley Hill........................................... 26,250(8) *
Oliver O. Ward............................................ 3,000(9) *
Patrick J. Sweeney........................................ 27,000 *
Lawrence Coolidge......................................... 181,160(2) 1.4
John F. Smith............................................. 12,000(10) *
John E. Pomeroy........................................... 9,000(11) **
James C. Taylor........................................... 11,600(12) *
All directors and executive officers as a group (16
persons)................................................ 1,277,338(13) 9.9
</TABLE>
- ---------------
* Less than one percent.
(1) Unless otherwise indicated, the named person possesses sole voting and
investment power with respect to the shares.
(2) See footnote (3) to the table under "Principal Holders of Voting
Securities."
(3) Includes 85,500 shares issuable upon the exercise of stock options granted
to Mr. Lietz that are currently exercisable or will become exercisable
within 60 days after January 2, 1998. Of the 149,946 shares listed in the
table above, 64,746 shares are held by a trust of which Mr. Lietz is the
sole trustee and sole beneficiary.
(4) Includes 29,900 shares issuable upon the exercise of stock options granted
to Mr. Losik that are currently exercisable or will become exercisable
within 60 days after January 2, 1998. Of the 36,100 shares listed in the
table above, 6,200 shares are held jointly with Mr. Losik's spouse.
(5) Consists of 14,000 shares issuable upon the exercise of stock options
granted to Mr. Mastrogiacomo that are currently exercisable or will become
exercisable within 60 days after January 2, 1998.
(6) Includes 3,750 shares issuable upon the exercise of stock options granted
to Mr. Sheehy that are currently exercisable or will become exercisable
within 60 days after January 2, 1998.
(7) Includes 28,700 shares issuable upon the exercise of stock options granted
to Mr. Saporito that are currently exercisable or will become exercisable
within 60 day after January 2, 1998.
5
<PAGE> 8
(8) Includes 3,000 shares issuable upon the exercise of currently exercisable
stock options granted to Mr. Hill. Does not include 20,000 shares owned by
Mr. Hill's wife, Doris Hill, as to which Mr. Hill disclaims beneficial
ownership.
(9) Consists of 3,000 shares issuable upon the exercise of currently
exercisable stock options granted to Mr. Ward that are currently
exercisable or will become exercisable within 60 days after January 2,
1998.
(10) Consists of 12,000 shares issuable upon the exercise of stock options
granted to Mr. Smith that are currently exercisable or will become
exercisable within 60 days after January 2, 1998.
(11) Includes 6,000 shares issuable upon the exercise of stock options granted
to Mr. Pomeroy that are currently exercisable or will become exercisable
within 60 days after January 2, 1998.
(12) Includes 6,000 shares issuable upon the exercise of currently exercisable
stock options granted to Mr. Taylor that are currently exercisable or will
become exercisable within 60 days after January 2, 1998.
(13) Includes 167,160 shares held by Lawrence Coolidge, James C. Hamilton, and
Gilbert M. Roddy, Jr., as co-trustees and 79,355 shares held by Horace H.
Irvine II as trustee, 8,910 shares held by James C. Hamilton, individually,
5,000 shares held by Mr. Coolidge, individually, and 9,000 shares issuable
upon the exercise of stock options granted to Mr. Coolidge that are
currently exercisable or will become exercisable within 60 days after
January 2, 1998. See footnote (3) to the table under "Principal Holders of
Voting Securities." Includes 85,500 shares issuable upon the exercise of
stock options granted to Andrew E. Lietz, that are currently exercisable or
will become exercisable within 60 days after January 2, 1998. See footnote
(3) above. Includes 29,900 shares issuable upon the exercise of stock
options granted to Mr. Losik that are currently exercisable or will become
exercisable within 60 days after January 2, 1998. See footnote (4) above.
Includes 14,000 shares issuable upon the exercise of stock options granted
to Mr. Mastrogiacomo that are currently exercisable or will become
exercisable within 60 days after January 2, 1998. See footnote (5) above.
Includes 3,750 shares issuable upon the exercise of stock options granted
to Mr. Sheehy that are currently exercisable or will become exercisable
within 60 days after January 2, 1998. See footnote (6) above. Includes
28,700 shares issuable upon the exercise of stock options granted to Mr.
Saporito that are currently exercisable or will become exercisable within
60 days after January 2, 1998. See footnote (7) above. Includes 3,000
shares issuable upon the exercise of stock options granted to Mr. Hill that
are currently exercisable or will become exercisable within 60 days after
January 2, 1998. See footnote (8) above. Includes 3,000 shares issuable
upon the exercise of stock options granted to Mr. Ward that are currently
exercisable or will become exercisable within 60 days after January 2,
1998. See footnote (9) above. Includes 12,000 shares issuable upon the
exercise of stock options granted to Mr. Smith that are currently
exercisable or will become exercisable within 60 days after January 2,
1998. See footnote (10) above. Includes 6,000 shares issuable upon the
exercise of stock options granted to Mr. Pomeroy that are currently
exercisable or will become exercisable within 60 days after January 2,
1998. See footnote (11). Includes 6,000 shares issuable upon the exercise
of stock options granted to Mr. Taylor that are currently exercisable or
will become exercisable within 60 days after January 2, 1998. See footnote
(12) above. Includes 1,100 shares owned by Mr. John T. Caruso, Jr., Senior
Vice President of the Corporation.
6
<PAGE> 9
BOARD COMMITTEES AND MEETINGS
The Board of Directors of the Corporation held six meetings during the
fiscal year ended October 25, 1997. At the meeting of the Board of Directors on
February 26, 1997, the Compensation Committee and the Stock Option Committee
were merged into one committee, the Joint Stock Option and Compensation
Committee. Prior to that date, the Compensation Committee, of which Messrs. Ward
(Chairman), Hill and Coolidge were members, determined the compensation of the
Corporation's senior management and held one meeting during fiscal 1997. Prior
to that date, the Stock Option Committee, of which Messrs. Hill (Chairman) and
Smith were members, administered and made recommendations and awards concerning
the Corporation's stock option plans. Prior to February 26, 1997, the Stock
Option Committee held one meeting during fiscal 1997. The Joint Stock Option and
Compensation Committee (the "Joint Committee") of which Messrs. Taylor
(Chairman), Ward, Hill and Pomeroy are members, now determines the compensation
of the Corporation's senior management, and administers and makes
recommendations and awards concerning the Corporation's stock option plans. The
Joint Committee held six meetings in fiscal 1997. The Audit Committee, of which
Messrs. Hill (Chairman), Ward and Smith are members, oversees financial results
and internal controls of the Corporation, including matters relating to the
appointment and activities of the Corporation's independent auditors, and met
three times during fiscal 1997. The Long-Term Planning and Strategy Committee,
of which Messrs. Smith (Chairman), Coolidge, Lietz, Pomeroy, Irvine, Taylor and
Sweeney are members, reviews and makes recommendations concerning long-term
planning and strategy matters relating to the Corporation. The Long-Term
Planning and Strategy Committee met four times during fiscal 1997. The Executive
Committee, of which Messrs. Ward (Chairman), Irvine, Sweeney and Lietz are
members, can act in place of the full Board of Directors to the extent permitted
by law. The Executive Committee held one meeting during fiscal 1997. The Finance
Committee, of which Messrs. Ward (Chairman), Irvine, Lietz, Coolidge and Taylor
are members, makes recommendations concerning general financial policy and held
eleven meetings during fiscal 1997. The Nominating Committee, of which Messrs.
Irvine (Chairman), Coolidge and Smith are members, recommends to the Board
nominations for the Board of Directors. The Nominating Committee will consider
highly qualified candidates proposed in writing by stockholders. Stockholders
who wish to propose a nomination should submit the person's name and background
information to the Clerk of the Corporation. The Nominating Committee held two
meetings during fiscal 1997. The current membership of the Committees was most
recently determined by the Board of Directors on February 26, 1997. During
fiscal 1997, no incumbent director attended fewer than 75% of the aggregate of
(i) the total number of meetings of the Board of Directors (held during the
period for which he has been a director) and (ii) the total number of meetings
held by all Committees of the Board on which he served (during the period that
he served).
7
<PAGE> 10
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION
The following table shows compensation information with respect to services
rendered to the Corporation in all capacities during the fiscal years ended
October 25, 1997, October 26, 1996 and October 28, 1995, for (i) the individual
who served as the Chief Executive Officer for the fiscal year ended October 25,
1997, and (ii) each of the four other most highly compensated executive officers
whose aggregate salary and bonus exceeded $100,000 in the fiscal year ended
October 25, 1997 (collectively with the Chief Executive Officer, the "Named
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(2)
ANNUAL AWARDS
COMPENSATION(1) SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND SALARY BONUS OPTIONS/SARs COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(3) (#) ($)(4)
------------------ ----- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Andrew E. Lietz(5)................. 1997 $301,647 $279,503 40,000 $ 1,387
Chief Executive Officer, 1996 200,000 220,674 0 7,394
President and Director 1995 200,000 192,690 0 6,301
Timothy P. Losik................... 1997 $159,673 $158,008 4,000 $ 939
Chief Financial Officer, 1996 107,173 151,443 10,000 5,828
Senior Vice President and
Treasurer..................... 1995 101,000 95,000 30,000 4,500
Christopher T. Mastrogiacomo....... 1997 $170,775 $153,737 8,000 $ 149,444(6)
Senior Vice President 1996 110,000 140,625 0 5,740
1995 110,000 100,000 0 1,500
Michael K. Sheehy.................. 1997 $141,032 $132,385 15,000 $ 1,218
Senior Vice President 1996 110,000 140,625 0 6,126
1995 69,596 20,000 0 0
Richard P. Saporito................ 1997 $131,387 $136,655 0 1,114
Senior Vice President 1996 92,570 118,991 0 5,215
1995 92,016 62,000 0 4,048
</TABLE>
- ---------------
(1) Excludes perquisites and other personal benefits for fiscal 1997, 1996 and
1995, the aggregate annual amount of which for each Named Officer was less
than the lesser of $50,000 or 10% of the total of annual salary and bonus
reported.
(2) The Corporation did not grant any restricted stock awards or stock
appreciation rights or make any long term incentive plan payouts during
fiscal 1997, 1996 and 1995.
(3) Bonuses are reported in the year earned, even if actually paid in a
subsequent year. Deferred portions are subject to forfeiture if a Named
Officers' employment is terminated for any reason other than death,
disability or retirement with the Corporation's consent.
(4) Includes the following matching 401(k) contributions to the Hadco
Corporation Retirement Plan (the "Retirement Plan") in fiscal 1997, 1996 and
1995, respectively: Andrew E. Lietz, $1,387, $1,375 and $1,500; Timothy P.
Losik, $939, $1,144 and $1,007; Christopher T. Mastrogiacomo, $1,052,
$1,054, and $1,414; Michael K. Sheehy, $1,218, $1,489 and $0; and Richard P.
Saporito, $1,115, $1,004 and $835. For fiscal 1997, the Corporation accrued,
and in December 1997 made, a contribution of $4,016,000 to the Retirement
Plan, which has not yet been allocated among the participants in the
Retirement Plan. Consequently, the total amount of contributions by the
Corporation in fiscal 1997 to the Retirement Plan
8
<PAGE> 11
for the Named Officers cannot be set forth. Also reflects the following
contributions to the Retirement Plan for fiscal 1996 and 1995, respectively
(with the 1996 contributions not having been previously allocated in time to be
included in the fiscal 1996 proxy statement): Andrew E. Leitz, $6,018 and
$4,801; Timothy P. Losik, $4,888 and $3,494; Christopher T. Mastrogiacomo
$4,685 and $3,520; Michael K. Sheehy, $4,636 and $2,814; and Richard P.
Saporito, $4,210 and $3,213.
(5) Mr. Lietz has an Employment Agreement with the Corporation containing a one
year non-competition agreement following termination of employment and
providing for a salary of $240,000 per year (adjusted by the Compensation
Committee in December 1996 and by the Joint Stock Option and Compensation
Committee in June 1997, to reflect a current rate of compensation of
$385,000 per year) and for the payment of one year's annual base salary if
his employment is terminated without cause; if such termination without
cause occurs after the first anniversary of the Employment Agreement, Mr.
Lietz will also be paid any bonus which such Joint Committee determines
would have been paid to him if his employment had continued through the end
of the fiscal year in which the termination occurs.
(6) Includes a one-time payment to Mr. Mastrogiacomo in fiscal 1997 of $148,392
in tax adjusted relocation expenses, of which $126,611 represents payment of
expenses accrued and $21,781 represents payment of taxes.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows information regarding grants of stock options to
the Named Officers during the fiscal year ended October 25, 1997. The
Corporation did not grant any stock appreciation rights in fiscal 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED ANNUAL
----------------------------------------------------------- RATES
NUMBER OF PERCENT OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED(#)(1) FISCAL YEAR(%) ($/SH)(1) DATE 5%($) 10%($)
- ------------------------ ------------- ---------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Andrew E. Lietz......... 40,000 15.1% $ 45.31 2/26/07 $1,139,809 $2,888,499
Timothy P. Losik........ 4,000 1.5% $ 47.44 12/2/06 $ 119,339 $ 302,429
Christopher T.
Mastrogiacomo......... 8,000 3.0% $ 47.44 12/2/06 $ 238,678 $ 640,857
Michael K. Sheehy....... 15,000 5.7% $ 47.44 12/2/06 $ 447,521 $1,134,107
Richard P. Saporito..... 8,000 3.0% $ 47.44 12/2/06 $ 238,678 $ 604,857
</TABLE>
- ---------------
(1) These options were granted at an exercise price equal to the fair market
value of the Corporation's Common Stock on the date of grant. These options
have a term of ten years from date of grant and become exercisable as to
15% of the shares on each of the first six anniversaries of the date of
grant and as to 10% of the shares on the seventh anniversary of the date of
grant.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation on the
Corporation's Common Stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Corporation's estimates of future stock
price growth. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the timing of such exercise and sale of the
shares and the future performance of the Corporation's Common Stock. There
can be no assurances that the rates of appreciation assumed in this table
can be achieved or that the amounts reflected will be received by the Named
Officers.
9
<PAGE> 12
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to options to purchase the
Corporation's Common Stock granted to the Named Officers under the Corporation's
stock option plans, including: (i) the number of shares of Common Stock
purchased upon exercise of options in the fiscal year ended October 25, 1997;
(ii) the net value realized upon such exercise; (iii) the number of unexercised
options outstanding at October 25, 1997; and (iv) the value of such unexercised
in-the-money options at October 25, 1997:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARs AT FY-END OPTIONS/SARs
ACQUIRED OCTOBER 25, 1997(#) AT FY-END($)(1)
ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------ ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Andrew E. Lietz............... 74,746 $ 4,113,079 61,500/108,500 $2,825,438/$3,498,013
Timothy P. Losik.............. 2,200 $ 69,880 20,575/ 39,075 $ 924,360/$1,445,571
Christopher T.
Mastrogiacomo............... 450 $ 27,270 6,900/ 34,600 $ 277,628/$ 984,980
Michael K. Sheehy............. 3,000 $ 118,242 0/ 27,000 $ 0/$ 446,775
Richard P. Saporito........... 0 0 32,650/ 17,050 $1,111,789/$ 487,379
</TABLE>
- ---------------
(1) Value is based on the difference between the option exercise price and the
fair market value of the Corporation's Common Stock on October 25, 1997
($54.27 per share, the last reported sale price of the Corporation's Common
Stock on the NASDAQ National Market on October 24, 1997), multiplied by the
number of shares underlying the option.
10
<PAGE> 13
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Corporation's Common Stock for the five fiscal
years ended October 25, 1997, with the cumulative total return for the NASDAQ
Market Index and an SIC Index that includes organizations in the Corporation's
Standard Industrial Classification (SIC) Code 3672 - Printed Circuit Design (the
"Peer Group"), currently consisting of 37 organizations. The comparison assumes
$100 was invested on October 31, 1992 in the Corporation's Common Stock and in
the foregoing NASDAQ Market Index and Peer Group and assumes reinvestment of
dividends, if any.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
HADCO CORPORATION, NASDAQ MARKET INDEX
AND PEER GROUP
[CHART GRAPHIC]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ MARKET
(FISCAL YEAR COVERED) CORPORATION INDEX PEER GROUP INDEX
<S> <C> <C> <C>
OCT. 1992 100 100 100
OCT. 1993 105.17 131.23 136.74
OCT. 1994 113.79 139.52 111.22
OCT. 1995 362.07 165.50 182.94
OCT. 1996 418.97 194.35 216.49
OCT. 1997 750.00 254.71 358.00
</TABLE>
JOINT STOCK OPTION AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
At a Board of Directors meeting on February 26, 1997, the Board of
Directors combined the functions of the former Compensation Committee (which had
been comprised of four outside directors and had determined salary and bonuses
of the Corporation's executive officers) and the former Stock Option Committee
(which had been comprised of three outside directors and had administered and
made recommendations and awards under the Corporation's stock option plans) into
one Committee, the Joint Stock Option and Compensation Committee (the "Joint
Committee"). Actions taken by either former Committee prior to February 26, 1997
are herein referenced separately. The Joint Committee is comprised of four
outside directors and determines salary and bonuses of the Corporation's
executive officers and administers and makes recommendations and awards under
the Corporation's stock option plans.
The Corporation's executive compensation policies are designed to provide
levels of compensation that assist the Corporation in attracting, motivating and
retaining qualified executives by providing a competitive
11
<PAGE> 14
compensation package based on corporate and individual performance. The
Corporation's executive compensation program for fiscal year 1997 consisted of
the following elements: (1) base salary; (2) incentive compensation in the form
of annual cash bonuses, and (3) long-term incentive compensation in the form of
non-qualified stock options. Elements (1), (2) and (3) are administered by the
Joint Committee.
The base salaries of the Corporation's executive officers, including the
Chief Executive Officer, are periodically compared by the Joint Committee with
survey data of the base salaries of executives in comparable industries. The
Joint Committee reviewed the base salaries of the Corporation's executive
officers with respect to such survey data. The companies used for this
comparison of base salaries were a different and much broader group than the
companies in the peer group used for comparison in the Corporation's Stock
Performance Graph. The Joint Committee felt that using this broader group of
companies, consisting of electronics and technology companies, for this
comparison was appropriate because it believed the responsibilities of the
Corporation's executive officers to be more comparable to those of this broader
group of companies in the electronics industry than just to those of printed
circuit companies.
In December 1996, the Compensation Committee increased the Chief Executive
Officer's base cash salary, effective October 22, 1996. In June 1997, the Joint
Committee determined that base cash salaries for the remainder of fiscal 1997
should also be increased for certain executive officers, including the Chief
Executive Officer's base cash salary, and increased his base cash salary
authorized the Chief Executive Officer to then determine increases in the base
cash salaries of the other executive officers. All these increases were deemed
necessary and appropriate for the Corporation to maintain competitiveness with a
broader group of companies as described in the last sentence of the preceding
paragraph. The Joint Committee used these increased salaries in determining the
bonuses to be paid for fiscal 1997 as provided below. In determining final
overall compensation levels for the Corporation's executive officers for fiscal
1997, the Joint Committee felt that any additional increases in compensation
(beyond those described above) should be tied to incentive considerations, with
the size of any bonus pool being dependent upon earnings per share and the
amount of the stock options to be granted being dependent on stock value.
In February 1996, the Compensation Committee had established a bonus plan
covering the executive officers entitled the Officer and Business Unit Manager
Bonus Plan (the "Bonus Plan") that called for bonuses to be made each year under
the Bonus Plan. Bonuses under the Bonus Plan for executives, except the Chief
Executive Officer, are based on a percentage of the executive's base cash salary
determined by reference to the following factors, which are intended to be
roughly weighted in the following indicated percentages: (1) annual earnings per
share of the Corporation (25%) and (2) the Corporation's financial results in
comparison to an industry peer group (25%); these amounts are then multiplied by
a percentage factor determined by the Joint Committee and based on the Chief
Executive Officer's evaluation of the participant's individual performance
(50%). Bonuses under the Bonus Plan for the Chief Executive Officer are also
based on a percentage of his base salary with reference to, and in the same
roughly weighted percentages, as indicated in clauses (1) and (2) above, with
the remaining 50% of his bonus determined based on the following factors:
overall company management (including integrating Zycon Corporation with the
Corporation), senior management team building, and strategic analysis and
planning. In May 1997, the Joint Committee changed the companies used for the
industry peer group comparison referenced in clause (2) above to a larger group
of companies intended to more closely match the Corporation's size and to
reflect a broader subset of the electronics industry. This comparison group is
different from and smaller than the companies in the peer group used for
comparison in the Corporation's Stock Performance Graph and from the group for
comparison of base cash salaries described above. The Joint Committee felt that
using this different group of companies, consisting of 15 organizations, was
appropriate because it believed that the performance of these companies is more
directly comparable to that of the Corporation for purposes of performance based
compensation.
12
<PAGE> 15
Under the Bonus Plan, individuals receive sixty percent (60%) of the bonus
when it is declared and the remaining forty percent (40%) in three equal
installments over a three-year period. Any deferred amounts are forfeited if an
individual's employment is terminated for any reason other than death,
disability or retirement with the Corporation's consent. These deferrals were
implemented with bonuses determined during December 1997 for the fiscal year
ended October 25, 1997.
The Joint Committee determined that the Corporation was to utilize stock
options as both a reward and incentive for executive performance and to align
management interests with shareholder interests. In determining the stock option
portion of the executive officers' (except the Chief Executive Officer's)
compensation (i.e., number of stock options granted to each individual executive
officer), the Joint Committee based its determination upon (1) general corporate
performance; (2) Chief Executive Officer's recommendations; (3) relevant
business unit performance; and (4) personal performance of the particular
executive officers. The Joint Committee assigned roughly equal weight to each of
the various criteria listed above. Each of these criteria was considered in the
context of the cyclical nature of the earnings of the Corporation, and the
particular challenges and difficulties faced by the printed circuit industry in
general during the time period in question. In addition, in determining levels
of awards of stock options to executive officers, the Joint Committee also took
into account the number of options already outstanding or previously granted to
each executive officer, the exercise price of the options in light of current
market value per share as a reflection of current value, and the time
outstanding before expiration of the respective options.
In determining the stock option portion of the Chief Executive Officer's
compensation for fiscal 1997, the Joint Committee took into account general
corporate performance and the personal performance of the Chief Executive
Officer, together with the ability of the Chief Executive Officer to enhance
shareholder value, provide overall leadership to the Corporation, including the
development and implementation of strategic plans for the Corporation, and
demonstrate organizational and management skill. The Joint Committee assigned
essentially equal weight to each of these criteria. In making its determination
as to stock option grant levels for the Chief Executive Officer, the Joint
Committee also took into consideration the following factors which are
considered in establishing such levels for the other executive officers: the
number of options already outstanding or previously granted to the Chief
Executive Officer, the exercise price of the options in light of current market
value per share as a reflection of current value, and the time outstanding
before expiration of the options.
Pursuant to ss.162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), the Corporation may deduct no more than $1,000,000 of compensation
for covered executive officers other than compensation that is "performance
based" within the meaning of ss.162(m) of the Code. The Joint Committee does
not currently anticipate the need to address this issue for cash compensation
because the current cash compensation of the Corporation's executive officers
subject to the deduction limitation rules of ss.162(m) of the Code does not
currently approach and is not expected to approach $1,000,000 soon. Option
grants pursuant to the Non-Qualified Stock Option Plan of November 29, 1995 are
intended to qualify as "performance-based" compensation, and such Plan is the
only equity-related plan of the Corporation that the Board of Directors
currently believes appropriate to bring into compliance with ss.162(m) of the
Code.
<TABLE>
<S> <C> <C>
Respectfully submitted Respectively submitted by Respectively submitted
by the Joint Stock Option and the former Compensation Committee: by the former Stock Option Committee:
Compensation Committee:
Oliver O. Ward, Chairman J. Stanley Hill, Chairman
James C. Taylor, Chairman Lawrence Coolidge John O. Irvine
J. Stanley Hill J. Stanley Hill John F. Smith
Oliver O. Ward John O. Irvine
John E. Pomeroy
</TABLE>
13
<PAGE> 16
COMPENSATION OF DIRECTORS
During fiscal 1997, the Corporation paid each Non-Employee Director an
annual fee of $15,000. During fiscal 1997, the Corporation also paid each
Non-Employee Director the additional fees of $750 for each meeting attended,
plus $500 for each additional Committee meeting held on the same day, and each
Chairman of a Committee of the Board of Directors received an additional annual
fee of $2,000 (collectively, the "Additional Fees"). In November 1997, the Board
of Directors voted to provide that a Committee meeting exceeding five hours
would be deemed to be an additional Committee meeting for purposes of payment of
the above additional $500 fee. It is expected that at the Board of Directors
Meeting on March 4, 1998, the Board of Directors will increase the above $15,000
annual fee for each Non-Employee Director to $20,000 (the "Annual Fee") and
provide that such Annual Fee will be paid entirely in shares of Common Stock of
the Corporation, such increase to be effective March 4, 1998. In December 1997,
the Board of Directors also adopted the Outside Directors' Compensation Plan
(the "Outside Directors' Plan") whereby a director can (i) elect to receive all
or a portion of the Additional Fees in shares of Common Stock of the
Corporation, and (ii) elect to defer all or part of payment of the Annual Fee
and the Additional Fees. The Outside Directors' Plan will be effective upon the
election of directors at the Annual Meeting of Stockholders on March 4, 1998,
and the number of authorized shares of Common Stock subject to the Outside
Directors' Plan will be 24,000 shares. Pursuant to the Outside Directors' Plan,
on or before the last day of the month preceding each annual meeting of
stockholders, each eligible Non-Employee Director may elect to have a percentage
of the Additional Fees specified by him, paid in Common Stock instead of in
cash, and may then elect deferral of payment of a specified percentage of the
Annual Fee and Additional Fees. Once made, the deferral remains in effect until
otherwise revoked in accordance with the terms of the Outside Directors' Plan,
and shall defer payment until such director no longer serves on the Board of
Directors. A deferral account shall be set up for each participating director
and such account shall be credited with a Common Stock equivalent for each share
of Common Stock such director would have received had no deferral been elected.
Except in the case of emergencies, distribution shall occur from this account
when the director no longer serves on the Board of Directors, and such director
shall then receive one share of Common Stock for each Common Stock Equivalent in
his or her deferral account and cash, including interest or dividends accrued or
earned as appropriate.
In addition, under the Corporation's 1991 Non-Employee Director Stock
Option Plan (the "Director Option Plan"), which was amended with approval of the
stockholders at the Annual Meeting of Stockholders on February 26, 1997, each
person who becomes a director for the first time and is not an employee of the
Corporation is automatically granted an option to purchase 15,000 shares of
Common Stock at the then current fair market value, with provision in such
Director Option Plan for acceleration of vesting upon a change of control as
defined therein. Each Non-Employee Director who was a member of the Board of
Directors on February 26, 1997 and who then had five years of service in such
capacity was automatically granted on February 26, 1997, and will be granted on
each anniversary of service in such capacity thereafter, without further action
by the Board of Directors, an option to purchase three thousand (3,000) shares
of the Corporation's Common Stock. Each Non-Employee Director who was a member
of the Corporation's Board of Directors on February 26, 1997 and who did not
then have at least five years of service in such capacity but who subsequently
achieves five years of service in such capacity, and each person who in the
future is elected for the first time as a Non-Employee Director and subsequently
achieves five years of service in such capacity, would each be automatically
granted, on the date of his or her fifth anniversary of service in such capacity
and on each anniversary of service in such capacity thereafter, without further
action by the Board of Directors, an option to purchase three thousand (3,000)
shares of the Corporation's Common Stock. The Director Option Plan requires that
options granted thereunder shall expire on a date which is seven (7) years from
the date of option grant. The above option to purchase 15,000 shares first
becomes exercisable to the extent of one-fifth of the shares covered by the
option; thereafter, one-fifth of the shares covered by such option will become
14
<PAGE> 17
exercisable on each anniversary of the option grant commencing with the first
anniversary of the option grant. The above options to purchase three thousand
(3,000) shares granted or to be granted in the future, vest in the optionee
immediately upon grant.
In August 1995, Mr. Patrick Sweeney resigned as President and Chief
Executive Officer of the Corporation, effective October 28, 1995. In connection
with his resignation, he entered into an agreement with the Corporation
providing that he would continue to remain an employee through January 31, 1996,
at his current annual salary of $200,000 per year, plus other standard fringe
benefits, and would serve as a consultant to the Corporation from February 1,
1996 through January 31, 1998 at compensation of $208,160 per year. Under the
agreement, from October 28, 1995 through January 31, 1998, his duties and
responsibilities shall be those reasonably requested of him by the President,
with it being anticipated that such duties may include marketing and public
relations services for the Corporation, both domestically and internationally.
Under the agreement, unvested stock options of Mr. Sweeney for 109,000 shares of
Common Stock were canceled. In the agreement, the Corporation agreed to pay Mr.
Sweeney a bonus on February 1, 1997, for services rendered to the Corporation
during fiscal 1995, of the same percentage of the bonus pools that would become
available for senior executives of the Corporation in respect of fiscal year
1995 that Mr. Sweeney received of senior executive bonus pools for fiscal year
1994. Although recorded in the agreement, this bonus was awarded based on
performance criteria independent of the arrangements in connection with Mr.
Sweeney's resignation; the agreement also provides that from February 1, 1996
through January 31, 1998, Mr. Sweeney, so long as he is not employed by another
employer, would receive reasonable and necessary out-of-pocket uninsured medical
(including dental and vision care) expenses incurred for treatment of himself
and his spouse up to and including a maximum cumulative aggregate amount of
$200,000. Should Mr. Sweeney die before January 31, 1998, all salary and
subsequent consulting fees would be due to his estate to the same extent as they
would have been due to him had he continued living. The agreement also contains
a non-competition covenant of Mr. Sweeney running through January 31, 1998 and
terminates his prior employment agreement with the Corporation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Horace H. Irvine II has a limited partnership interest of 17% in a New
Hampshire limited partnership (the "Partnership"). Most of the Corporation's
space in Salem, New Hampshire is leased from the Partnership pursuant to three
lease agreements, with terms ranging from one to five years. The three leases,
which together account for approximately 62% of the space leased from the
Partnership, contain extension options of the Corporation, which, if exercised,
would result in an escalation of annual fixed rent in accordance with a formula
based on the Consumer Price Index. Two of the leases expire in October 2000 with
options available through October 2006, and one of the leases expires in March
2000 with an option available through March 2006. As a result of checking by
management of other relevant real estate transactions, the Corporation believes
that these leases are on terms no less favorable to the Corporation than could
be obtained from unaffiliated parties. For the Corporation's 1997 fiscal year,
the Corporation had aggregate rental expense under these leases of approximately
$533,000. At the time of entry into the leases, Mr. Irvine was an executive
officer and director of the Corporation.
Mr. Hamilton, Clerk of the Corporation, is a partner in the law firm of
Berlin, Hamilton & Dahmen LLP, which serves as general counsel to the
Corporation. The Corporation paid Berlin, Hamilton & Dahmen LLP fees of $509,430
for professional services rendered in fiscal 1997.
15
<PAGE> 18
PROPOSAL TO APPROVE
HADCO CORPORATION EMPLOYEE STOCK PURCHASE PLAN
OF NOVEMBER 17, 1997
Shareholders are being asked to approve the adoption of the Corporation's
Employee Stock Purchase Plan of November 17, 1997 (the "1997 Plan"). The Board
of Directors believes that the approval of the 1997 Plan is in the best
interests of the Corporation because of the need to provide equity participation
to attract and retain quality employees and remain competitive in the industry.
The 1997 Plan plays an important role in the Corporation's efforts to attract
and retain employees of outstanding ability.
The Board of Directors adopted the 1997 Plan in November 1997 subject to
shareholder approval. Below is a summary of the principal provisions of the 1997
Plan, assuming shareholder approval. The summary is not necessarily complete,
and reference should be made to the full text of the 1997 Plan, which is
attached to this Proxy Statement as Appendix A.
PURPOSE
The purpose of the 1997 Plan is to provide eligible employees of the
Corporation, and its subsidiaries designated by the Board of Directors
("Affiliates"), with a convenient means to acquire an equity interest in the
Corporation through payroll deductions, to provide an incentive for continued
employment and to secure and retain the services of new employees and provide
incentives for such persons to exert maximum efforts for the success of the
Corporation. The Corporation intends that the 1997 Plan will qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended (the "Code").
SHARES SUBJECT TO THE 1997 PLAN
The shares subject to issuance under the 1997 Plan consist of the
Corporation's authorized but unissued Common Stock, but may also be treasury
shares. An aggregate of 500,000 shares of Common Stock have been reserved by the
Board of Directors for issuance under the 1997 Plan. This number of shares, and
any other number of shares specified in the 1997 Plan, are subject to
appropriate adjustment to reflect stock splits, stock dividends,
recapitalizations, reorganizations and other similar events. If any right
granted under the 1997 Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available under the 1997 Plan.
ADMINISTRATION
The 1997 Plan will be administered by the Board of Directors unless and
until the Board of Directors designates an Administrator and delegates
administration to it. Whether or not the Board of Directors has so delegated
administration, the Board of Directors shall have the power to construe and
interpret the 1997 Plan and the final power to determine all questions of policy
and expediency that may arise in the administration of the 1997 Plan.
ELIGIBILITY
Employees of the Corporation and any Affiliates are eligible to participate
in an Offering Period (as defined below) under the 1997 Plan, except the
following:
(a) employees who have not delivered a participation agreement no
later than two (2) weeks prior to the commencement of an Offering Period
(as defined below), unless otherwise determined by the Board of Directors;
(b) employees who are customarily employed for less than 20 hours per
week; and
16
<PAGE> 19
(c) employees who own shares or hold options to purchase shares (or
who, as a result of participation in the 1997 Plan, would own shares or
hold options to purchase shares), collectively possessing 5% or more of the
total combined voting power or value of all classes of shares of the
Corporation or any Affiliate.
As of December 31, 1997, approximately 5,550 persons were eligible to
participate in the 1997 Plan, and no shares had been issued pursuant to the 1997
Plan. The Board of Directors has designated Hadco Santa Clara, Inc. as an
Affiliate. As of December 31, 1997, the closing price of the Corporation's
Common Stock on the Nasdaq National Market was $45.50 per share. Officers of the
Corporation or any Affiliates shall be eligible to participate in Offerings (as
defined below).
Employees participate in the 1997 Plan through payroll deductions that will
be applied to purchase shares as described below. An employee sets the rate of
such payroll deductions, which may not be less than 1% nor more than 10% of the
employee's compensation during a calendar year, including regular salary or
wages (including certain amounts elected to be deferred by the employee),
commissions, bonuses, overtime pay, incentive pay and profit sharing, but
excluding the cost of employee benefits paid by the Corporation or its
Affiliates, income received in connection with stock options, contributions made
by the Corporation or an Affiliate under any employee benefit plan, and similar
items as determined by the Board of Directors. The Board of Directors has the
power to amend the 1997 Plan to provide maximum benefits to participants and to
bring the 1997 Plan into compliance with the Code. The Board of Directors may
provide that certain officers of the Corporation or any designated Affiliates
who are highly compensated employees within the meaning of Section 423(b)(4)(D)
of the Code shall not be eligible to participate. No employee is permitted to
purchase shares under the 1997 Plan at a rate which, when aggregated with such
employee's rights to purchase shares under all similar purchase plans of the
Corporation and any Affiliates, exceed $25,000 in fair market value determined
as of the Offering Date (as defined below) for each calendar year in which such
rights are outstanding at any time.
OFFERING PERIODS
The Board of Directors shall have the authority to determine when and how
rights to purchase shares (an "Offering") shall be granted, and such rights need
not be identical. The Board of Directors shall establish a date during the
Offering on which rights granted under the 1997 Plan shall be exercised. Unless
otherwise specified, there shall be two Offerings during each year, each
Offering of Common Stock under the 1997 Plan will be for a period of six months
(the "Offering Period") and the Offering Periods are planned to commence on
January 1 and July 1 of each year ("Offering Dates") and end on June 30 and
December 31 of each year ("Purchase Dates"), respectively. The initial Offering
Period shall begin on January 1, 1998, but no rights granted under the 1997 Plan
shall be exercised unless and until the 1997 Plan has been approved by the
stockholders of the Corporation which approval must occur within twelve (12)
months after the date the Board of Directors adopted the 1997 Plan (November 17,
1997).
Employees will participate in the 1997 Plan during each Offering Period
through regular payroll deductions as described above. Employees may elect to
participate in any Offering Period by enrolling as provided under the terms of
the 1997 Plan. Once enrolled, an employee will automatically participate in each
succeeding Offering Period unless the employee withdraws from the Offering
Period or the 1997 Plan is terminated. The employee may increase or lower the
rate of payroll deductions for any subsequent Offering Period, but may only
terminate or reduce to zero the rate of payroll deductions for an ongoing
Offering Period. A participant's withdrawal will have no effect on the right to
participate in future Offering Periods.
17
<PAGE> 20
PURCHASE PRICE
The purchase price of shares that may be acquired in any Offering Period
under the 1997 Plan shall not be less than the lesser of: (i) 85% of the fair
market value of the shares on the Offering Date; or (ii) 85% of the fair market
value of the shares on the Purchase Date.
PURCHASE OF SHARES UNDER THE 1997 PLAN
The number of whole shares an employee will be able to purchase in any
Offering Period will be determined by dividing the total payroll amount withheld
from the employee during the Offering Period pursuant to the 1997 Plan by the
purchase price for each share determined as described above, rounded down to the
nearest whole number. No fractional shares shall be issued and any remainder in
the participant's account will be held until the next Offering Period. The
purchase will take place automatically on the Purchase Date of such Offering.
The maximum aggregate number of shares which may be purchased in an Offering is
500 shares of Common Stock.
WITHDRAWAL
An employee may withdraw upon written notice on the form provided by the
Corporation, from any Offering Period. Upon withdrawal, the accumulated payroll
deductions will be returned to the withdrawn employee, without interest, and
such participant's interest shall automatically terminate. No further payroll
deductions for the purchase of shares will be made for the succeeding Offering
Period unless the employee enrolls in the new Offering Period at least two (2)
weeks before the Offering Date. Rights granted pursuant to an Offering shall
terminate immediately upon cessation of employment with the Corporation or any
designated Affiliate.
TRANSFERABILITY
Rights granted under the 1997 Plan shall not be transferable by a
participant other than by will or the laws of descent and distribution, or by
beneficiary designations, and during his or her lifetime shall be exercisable
only by the person to whom such rights are granted.
AMENDMENT OF THE 1997 PLAN
The Board of Directors may at any time, and from time to time, suspend or
amend the 1997 Plan but rights and obligations under any rights granted before
amendment of the 1997 Plan shall not be impaired by any amendment of the 1997
Plan, except with the consent of the person to whom such rights were granted, or
except as necessary to comply with any laws or governmental regulation, or
except as necessary to ensure that the 1997 Plan and/or rights granted under the
1997 Plan comply with the requirements of Section 423 of the Code. No amendment
shall be effective without shareholder approval within twelve (12) months before
or after the adoption of such amendment, where the amendment would: (a) increase
the number of shares reserved under the 1997 Plan, (b) modify the eligibility
for participation in the 1997 Plan (to the extent such modification requires
stockholder approval in order for the 1997 Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3, as promulgated under the Securities Exchange Act of
1934, as amended ("Rule 16b-3")), or (c) modify the 1997 Plan in any other way,
if such modification requires stockholder approval under the Code or the
requirements of Rule 16b-3.
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TERM OF THE 1997 PLAN
The 1997 Plan will continue until the earlier to occur of: (i) termination
of the 1997 Plan by the Board of Directors; or (ii) the issuance of all the
Common Stock reserved for issuance under the 1997 Plan, as increased and/or
adjusted from time to time.
FEDERAL INCOME TAX INFORMATION
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT
OF THE FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND EMPLOYEES
PARTICIPATING IN THE 1997 PLAN. FEDERAL TAX LAWS MAY CHANGE AND THE FEDERAL,
STATE AND LOCAL TAX CONSEQUENCES FOR ANY PARTICIPATING EMPLOYEE WILL DEPEND UPON
HIS OR HER INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPATING EMPLOYEE HAS BEEN AND IS
ENCOURAGED TO SEEK THE ADVICE OF A QUALIFIED TAX ADVISER REGARDING THE TAX
CONSEQUENCES OF PARTICIPATION IN THE 1997 PLAN.
The 1997 Plan is intended to qualify as an "employee stock purchase plan"
within the meaning of Section 423 of the Code.
Federal Income Tax Consequences. The following discussion summarizes
certain U.S. federal income tax considerations for participants under the 1997
Plan and certain tax effects on the Corporation, based upon the provisions of
the Code as in effect on the date of this Proxy Statement, current regulations
and existing administrative rulings of the IRS. However, the summary is not
intended to be a complete discussion of all the federal income tax consequences
of this plan:
1. The amounts deducted from an employee's pay under the 1997 Plan will be
included in the employee's compensation subject to Federal income tax. Subject
to certain requirements, generally no additional income will be recognized by
the employee either at the time rights are granted under the 1997 Plan or at the
time the employee purchases shares under the 1997 Plan.
2. If the employee disposes of Common Stock purchased pursuant to the 1997
Plan more than two years after the first business day of the Offering Period in
which the employee acquired the shares, then upon such disposition the employee
will recognize ordinary income in an amount equal to the lesser of:
(a) the excess, if any, of the fair market value of the shares at the
time of disposition over the amount the employee paid for the shares,
or
(b) the excess of the fair market value of the shares on the first
business day of the Offering Period over the option price.
3. If the employee disposes of shares purchased pursuant to the 1997 Plan
within two years after the first business day of the Offering Period in which
the employee acquired the shares, then upon disposition the employee will
generally recognize ordinary income in an amount equal to the excess, if any, of
the fair market value of the shares on the last business day of the applicable
Offering Period over the amount the employee paid for the shares.
In addition, the employee generally will recognize capital gain or loss in
an amount equal to the difference between the amount realized upon the sale of
the shares and the employee's tax basis in the shares (i.e., the amount the
employee paid for the shares plus the amount, if any, taxed to the employee as
ordinary income). If the employee's holding period for the shares is more than
one year, such gain or loss will generally be long-term capital gain or loss.
4. If the employee disposes of shares purchased pursuant to the 1997 Plan
more than two years after the first business day of the Offering Period, the
Corporation will not be entitled to a corresponding Federal
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income tax deduction with respect to such shares. If this two-year holding
period is not satisfied, the Corporation generally will be entitled to a federal
income tax deduction in an amount equal to the amount which is treated as
ordinary income.
ERISA. The 1997 Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") nor is it qualified
under Section 401(a) of the Code.
The affirmative vote of a majority of all shares of the Corporation present
in person or by proxy at the Annual Meeting of Stockholders is required for the
approval of the 1997 Plan.
The Board recommends a vote FOR the approval of the 1997 Plan.
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PROPOSAL TO AMEND THE CORPORATION'S
RESTATED ARTICLES OF ORGANIZATION
On December 15, 1997, the Board of Directors voted in favor of adopting,
and directed that there be submitted to the stockholders for their approval, an
amendment to the Corporation's Restated Articles of Organization (the
"Charter"), to increase the number of authorized shares of Common Stock, par
value $.05 per share, from 25,000,000 to 50,000,000 shares. Shares of the
Corporation's Common Stock, including the additional shares proposed for
authorization, do not have preemptive or similar rights.
As of January 2, 1998, there were approximately 13,095,982 shares of Common
Stock issued and outstanding, and assuming the proposal to approve the Employee
Stock Purchase Plan of November 17, 1997 (the "1997 Plan") is approved, there
will be approximately 500,000 shares reserved for future issuance pursuant to
the 1997 Plan and 2,792,610 shares reserved for future issuance or subject to
currently outstanding options under the Corporation's various stock option and
compensation plans for employees and directors and under the 1997 Plan. If the
proposed amendment to the Charter is approved, the Board of Directors will have
the authority to issue approximately 34,111,408 additional shares of Common
Stock without further stockholder approval. The additional shares could be used
for issuance for the potential purposes described below and for issuance under
the Corporation's Stockholder Stock Rights Plan of August 22, 1995 (the "Rights
Plan").
REASONS FOR INCREASE IN AUTHORIZED COMMON STOCK
The Board of Directors believes the authorized number of shares of Common
Stock should be increased to provide sufficient shares for such corporate
purposes as may be determined by the Board of Directors to be necessary or
desirable. These purposes may include, without limitation: facilitating broader
ownership of the Corporation's Common Stock by effecting a stock split or
issuing a stock dividend; acquiring other businesses in exchange for shares of
the Corporation's Common Stock; entering into collaborative research and
development arrangements with other companies in which Common Stock or the right
to acquire Common Stock are part of the consideration; attracting and retaining
valuable employees by the issuance of additional stock options including
additional shares reserved for future option grants under the Corporation's
existing stock plans; raising capital through the sale of Common Stock or
securities convertible into Common Stock; and other transactions involving the
use of Common Stock. The Corporation at present has no commitments, agreements
or undertakings to issue any additional shares for any such purpose.
The proposed increase in authorized shares of Common Stock would also
increase the shares available for issuance under the Rights Plan. The
Corporation's Board of Directors adopted the Rights Plan, pursuant to which
Common Stock Purchase Rights (the "Rights") were distributed as a Rights
dividend on September 11, 1995 at the rate of one Right for each share of Common
Stock held as of the close of business on that date. The Rights Plan was adopted
by the Corporation's Board of Directors on August 22, 1995 and was designed to
prevent an acquirer from gaining control of the Corporation without offering a
fair price to all of the Corporation's stockholders. This adoption did not
require stockholders' approval. The Rights Plan was not adopted by the Board of
Directors in response to any specific offer or threat, but rather is intended to
protect the interests of stockholders in the event the Corporation is confronted
in the future with takeover tactics. Each Right will entitle holders of Common
Stock to buy one share of Common Stock of the Corporation at an exercise price
of $130. The Rights will be exercisable only after 10 days following a public
announcement that a person or group acquires more than 20% (exempting the stock
ownership of Horace H. Irvine II, the founder and Chairman of the Board of the
Corporation, and certain related persons or entities) of the Common Stock (the
"Stock Acquisition Date"), or 10 business days after such person or group
announces a tender or exchange offer which would result in its ownership of 25%
or more of the Common Stock, or 10 business days after a person owning 10% or
more of the Common Stock is determined by the Board to be an "Adverse
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<PAGE> 24
Person," as defined in the Rights Plan. The more-than-20% stockholder threshold
described above is not triggered by revocable proxies. Under the Rights Plan, an
"Acquiring Person" is defined as a "Beneficial Owner" of more than 20% of Common
Stock; however such definition excludes any security the ownership of which
arises solely from a revocable proxy given in response to a public proxy or
consent solicitation in accordance with the provisions of the Exchange Act and
not also reportable on Schedule 13D. If any person or group becomes the
beneficial owner of 25% or more of the Corporation's Common Stock except
pursuant to a tender offer for all shares at a price that a majority of the
independent directors determines to be fair; if a more-than-20% stockholder
engages in a merger with the Corporation in which the Corporation survives and
its Common Stock remains outstanding and unchanged; if certain other events
involving the Corporation and a more-than-20% stockholder occur; or, if under
certain circumstances, the Board determines a 10% or more stockholder to be an
Adverse Person, then each Right not owned by such person or related parties will
entitle its holder to purchase, at the then current exercise price of the Right,
Common Stock of the Corporation (or, in certain circumstances as determined by
the Board of Directors, including the failure of the stockholders to increase
the authorized Common Stock as proposed hereby, a combination of cash, property,
Common Stock or other securities or a reduction in the exercise price) having a
value of twice the Right's exercise price. In such circumstances, the
Corporation may also exchange one share of Common Stock for each Right
outstanding. In addition, if the Corporation is involved in a merger or other
business combination transaction with another person in which its Common Stock
is changed or converted, or sells or transfers more than 50% of its assets or
earning power to another person, each Right that has not previously been
exercised will entitle its holder to purchase, at the then current exercise
price of the Right, shares of Common Stock of such other person having a value
of twice the Right's exercise price. In general, the Corporation can redeem the
Rights at $0.01 per Right at anytime prior to ten days following the Stock
Acquisition Date. The Rights will expire on September 11, 2005, unless earlier
redeemed or exchanged. The Rights have certain anti-takeover effects, in that
they can cause substantial dilution to a person or group that attempts to
acquire a significant interest in the Corporation on terms not approved by the
Board of Directors. A copy of the Rights Plan was filed with the Securities and
Exchange Commission as an Exhibit to the Company's Report on Form 10-K dated
August 22, 1995. A copy of the Rights Plan is available, free of charge from the
Corporation. If the stockholders do not approve the proposed Amendment to the
Corporation's Restated Articles of Organization, the Rights Plan will remain in
effect.
The Board of Directors believes that the authorized number of shares of
Common Stock should be increased to provide additional shares to be available
for the potential corporate purposes described above and for issuance under the
Rights Plan. Although there is no specific number of shares designated for use
in the Rights Plan, a large number of authorized but unissued shares of Common
Stock available for the stockholders to purchase upon exercise of the Rights
increases the Board of Director's flexibility in administering the Rights Plan.
The Board of Directors considers the authorization of additional shares of
Common Stock advisable for this reason and to ensure the prompt availability of
sufficient shares for issuance for other corporate purposes should needs or
opportunities arise. The Board of Directors cannot predict the timing, magnitude
or purpose of any future issuance of such shares.
ANTI-TAKEOVER CONSIDERATIONS
If the proposed amendment to the Charter is approved, the Board of
Directors will have the authority to issue approximately 34,111,408 additional
shares without further stockholder approval. The issuance of additional shares
of Common Stock could have the effect of diluting earnings per share and book
value per share, which could adversely affect the corporation's existing
stockholders. Issuance of shares of Common Stock under the Rights Plan could be
used to make a change in control of the Corporation more difficult or costly by
diluting stock ownership of persons seeking to obtain control of the
Corporation. The Corporation is not aware, however, of any currently pending or
currently threatened efforts to obtain control of the
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<PAGE> 25
Corporation, and the Board of Directors has no current intention to use the
additional shares of Common Stock in order to impede a takeover attempt.
The Corporation is subject to applicability of the provisions of Chapter
110F of the Massachusetts General Laws, the so-called Business Combination
Statute. Under Chapter 110F, a Massachusetts corporation with over 200
stockholders, such as the Corporation, may not engage in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless (i) the interested stockholder obtains the approval of the
Board of Directors prior to becoming an interested stockholder , (ii) the
interested stockholder acquires 90% of the outstanding voting stock of the
corporation (excluding shares held by certain affiliates of the corporation) at
the time it becomes an interested stockholder, or (iii) the business combination
is approved by both the Board of Directors and the holders of two-thirds of the
outstanding voting stock of the corporation (excluding shares held by the
interested stockholder). An "interested stockholder" is a person who, together
with affiliates and associates, owns (or at any time within the prior three
years did own) 5% of more of the outstanding voting stock of the corporation. A
"business combination" includes a merger, a stock or assets sale, and other
transactions resulting in a financial benefit to the stockholder.
The Corporation is subject to applicability of Massachusetts General Laws
Chapter 110D, entitled "Regulation of Control Share Acquisitions." In general,
this statute provides that any stockholder of a corporation subject to this
statute who acquires 20% or more of the outstanding voting stock of a
corporation (except in certain transactions) may not vote such stock unless the
stockholders of the corporation so authorize. The statute specifically excludes
situations where any person acquires the triggering 20% ownership "solely by
virtue of a revocable proxy conferring the right to vote." The Board of
Directors may amend the Corporation's By-Laws at any time to exclude the
Corporation from this statute prospectively. On April 18, 1990, Massachusetts
enacted Chapter 156B sec. 50A of the Massachusetts General Laws which, in
general, requires that publicly held Massachusetts corporations have a
classified board of directors consisting of three classes as nearly equal in
size as possible. Once a corporation is subject to the classified board
provisions of this statute, directors may be removed by a majority vote of the
stockholder only for cause. This statute provides that a corporation may elect
to be exempt from the classified board provisions by a vote of its directors. By
vote of the Board of Directors, the Corporation has elected to be exempt from
the classified board provisions of this statute.
Any or all of the ability to issue a large number of shares of Common Stock
without further stockholder approval, the above provisions of Massachusetts
General Laws and the Rights Plan may have the effect of delaying, deferring or
preventing changes in control or management of the Corporation.
Approval of the proposed amendment would require the affirmative vote of a
majority of all outstanding shares of Common Stock of the Corporation, whether
voting in person or by proxy at the Annual Meeting of Stockholders. The Board of
Directors recommends a vote FOR the approval of the amendment to the
Corporation's Restated Articles of Organization.
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Arthur Andersen LLP,
independent certified public accountants, to serve as auditors for the fiscal
year ending October 31, 1998. Arthur Andersen LLP has served as the
Corporation's auditors and outside accountants since 1966. It is expected that a
member of the firm will be present at the Annual Meeting of Stockholders with
the opportunity to make a statement if so desired and will be available to
respond to appropriate questions. The directors recommend a vote FOR
ratification of this selection. The ratification of this selection is not
required under the laws of the Commonwealth of
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Massachusetts, where the Corporation is incorporated, but the results of this
vote will be considered by the Board of Directors in selecting auditors for
future fiscal years.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement to
be furnished to all stockholders entitled to vote at the next annual meeting of
the Corporation must be received at the Corporation's principal executive
offices no later than September 25, 1998. In order to curtail controversy as to
the date on which a proposal was received by the Corporation, it is suggested
that proponents submit their proposals by Certified Mail -- Return Receipt
Requested.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation, and
in addition to soliciting stockholders by mail through its regular employees,
the Corporation may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Corporation
registered in the names of a nominee and, if so, will reimburse such banks,
brokers and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by officers and employees of the Corporation
may also be made of some stockholders in person or by mail, telephone or
telegraph following the original solicitation.
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APPENDIX A
HADCO CORPORATION
EMPLOYEE STOCK PURCHASE PLAN OF NOVEMBER 17, 1997
1. Purpose.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Hadco Corporation (the "Company"), and its
Affiliates, as defined in subparagraph 1(b), which are designated as provided in
subparagraph 2(b), may be given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. Administration.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to an
Administrator, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the Company shall
be granted and the provisions of each Offering of such rights (which need not be
identical).
(ii) To designate from time to time which Affiliates of the Company shall
be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under it, and
to establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company
and its Affiliates and to carry out the intent that the Plan be treated as an
"employee stock purchase plan" within the meaning of Section 423 of the Code.
(c) The Board may delegate administration of the Plan to a person or entity
to be determined from time to time by the Board (the "Administrator"). If
administration is delegated to an Administrator, the
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Administrator shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board, subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may terminate the Administrator at any
time and revest in the Board the administration of the Plan.
3. Shares Subject to the Plan.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate 500,000 shares of the Company's
common stock (the "Common Stock"). If any right granted under the Plan shall for
any reason terminate without having been exercised, the Common Stock not
purchased under such right shall again become available for the Plan.
(b) The stock subject to the Plan may be new shares or treasury shares.
4. Grant of Rights; Offering.
(a) The Board or the Administrator may from time to time grant or provide
for the grant of rights to purchase Common Stock of the Company under the Plan
to eligible employees (an "Offering") on a date or dates the ("Offering
Date(s)") selected by the Board or the Administrator. The Board or the
Administrator shall establish a date during an Offering (the "Purchase Date") on
which rights granted under the Plan shall be exercised and purchases of Common
Stock carried out in accordance with such Offering. Each Offering shall be in
such form and shall contain such terms and conditions as the Board or the
Administrator shall deem appropriate, which shall comply with the requirements
of Section 423(b)(5) of the Code that all employees granted rights to purchase
stock under the Plan shall have the same rights and privileges. The terms and
conditions of an Offering shall be incorporated by reference into the Plan and
treated as part of the Plan. The provisions of separate Offerings need not be
identical, but each Offering shall include (through incorporation of the
provisions of this Plan by reference in the memorandum documenting the Offering
or otherwise) the period during which the Offering shall be effective, which
period shall not exceed twenty-seven (27) months beginning with the Offering
Date, and the substance of the provisions contained in paragraphs 5 through 8,
inclusive.
(b) Unless otherwise specified by the Board or the Administrator, there
shall be two Offerings under the Plan during each calendar year, the Offering
Dates and Purchase Dates, respectively, of each Offering shall be (i) January 1
and June 30, and (ii) July 1 and December 31.
5. Eligibility.
(a)Rights may be granted only to employees of the Company or, as the Board
or the Administrator may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee's
customary employment with the Company or such Affiliate is for at least twenty
(20) hours per week. An employee who becomes eligible to participate in the Plan
after any date on which rights are granted shall be granted rights on the first
date of the next Offering on which rights are granted to eligible employees
under the Plan. In addition, unless otherwise determined by the Board or the
Administrator and set forth in the terms of the applicable Offering, an employee
shall not be eligible to be granted rights under the Plan, unless he or she has
enrolled in the Plan by delivering to the Company, on a form provided by the
Company, a participation agreement, such participation agreement shall only be
effective for participation in an Offering if the participation agreement is
delivered to the Company no later than two (2) weeks before the Offering or
within such other time specified by the Board or the Administrator. Once a
participation agreement is executed and delivered to the Company, it shall be
operative
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(for the immediately succeeding Offering and all subsequent Offerings for which
the employee is eligible) unless affirmatively withdrawn by the employee as
provided in subparagraph 7(b) hereof.
(b) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5 (b), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(c) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(d) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. Rights; Purchase Price.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage not
exceeding ten percent (10%) of such employee's Earnings (as defined in
subparagraph 7(a)) during the calendar year, provided however, that the maximum
number of shares which may be purchased by any eligible employee during an
Offering shall not exceed 500 shares (subject to adjustment pursuant to Section
12).
(b) In connection with each Offering made under the Plan, the Board or the
Administrator may specify a maximum aggregate number of shares which may be
purchased by all eligible employees pursuant to such Offering. If the aggregate
purchase of shares upon exercise of rights granted under the Offering would
exceed any such maximum aggregate number, the Board or the Administrator shall
make a pro rata allocation of the shares available in as nearly a uniform manner
as shall be practicable and as it shall deem to be equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
7. Participation; Withdrawal; Termination.
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company on or before
the date which is two (2) weeks before the Offering Date, in accordance with
paragraph 5(a). Each such agreement shall authorize payroll deductions of not
less than one percent (1%) but not more than ten percent (10%) of such
employee's Earnings during the calendar year. "Earnings" is defined as an
employee's regular salary or wages (including amounts thereof elected to be
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deferred by the employee, that would otherwise have been paid, under any
arrangement established by the Company intended to comply with Section 401(k),
Section 402(e)(3), Section 125, Section 402(h), or Section 403(b) of the Code,
and also including any deferrals under a non-qualified deferred compensation
plan or arrangement established by the Company), which shall include bonuses,
commissions, overtime pay, incentive pay, profit sharing, and other remuneration
paid directly to the employee, but excluding the cost of employee benefits paid
for by the Company or an Affiliate, education or tuition reimbursements, imputed
income arising under any group insurance or benefit program, traveling expenses,
business and moving expense reimbursements, income received in connection with
stock options, contributions made by the Company or an Affiliate under any
employee benefit plan, and similar items of compensation, as determined by the
Board or the Administrator. The payroll deductions made for each participant
shall be credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may, after the
beginning of any Offering, reduce to zero such payroll deductions, but may not
make other changes in the payroll deductions during the Offering period.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Administrator in the Offering. Upon such withdrawal
from the Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan, but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his of her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by beneficiary designation as provided in paragraph 14, and otherwise during his
or her lifetime, shall be exercisable only by the person to whom such rights are
granted.
8. Exercise.
(a) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest.
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<PAGE> 31
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. Covenants of the Company.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. Use of Proceeds From Stock.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. Rights as a Shareholder
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
12. Adjustments Upon Changes in Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
Administrator, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the
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<PAGE> 32
surviving corporation but the shares of the Company's Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4) any
other capital reorganization in which more than fifty percent (50%) of the
shares of the Company entitled to vote are exchanged, then, as determined by the
Board in its sole discretion (i) any surviving corporation may assume
outstanding rights or substitute similar rights for those under the Plan, (ii)
such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
13. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan (to the extent such modification requires shareholder approval in
order for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule
16b-3")); or
(iii) Modify the Plan in any other way if such modification requires
shareholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to employee stock
purchase plans and/or to bring the Plan and/or rights granted under it into
compliance therewith.
(b) Rights and obligations under any rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with the consent
of the person to whom such rights were granted, or except as necessary to comply
with any laws or governmental regulation, or except as necessary to ensure that
the Plan and/or rights granted under the Plan comply with the requirements of
Section 423 of the Code.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participantIs account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
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<PAGE> 33
15. Termination or Suspension of the Plan.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate at the time that all of the shares subject
to the Plan's share reserve, as increased and/or adjusted from time to time,
have been issued under the terms of the Plan. No rights may be granted under the
Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of Section 423
of the Code.
16. Withholding of Additional Income Taxes.
(a) Upon the purchase of any shares pursuant to this Plan, the Company
shall withhold taxes in respect of any amounts that constitute compensation
includable in gross income. The Board or the Administrator, in its discretion,
may condition the purchase of any shares during an Offering on the participant's
making satisfactory arrangement for such withholding. Such arrangement may
include payment by the participant in cash or check of the amount of withholding
taxes or, authorizing the Company to withhold funds from compensation otherwise
payable to the participant.
(b) The Company may also make appropriate arrangements for satisfying
withholding obligations in the event of a disqualifying disposition of the
Common Stock by a participant. Such arrangements may include conditioning the
disposition of the Common Stock by the participant upon the payment to the
Company of an amount sufficient to satisfy such withholding requirements.
17. Notice to Company of Disqualifying Disposition.
If a participant transfers Common Stock acquired under the Plan within two
years after the first business day of the Offering in which such Common Stock
was acquired, then the participant shall immediately notify the Company in
writing of such transfer. Each participant shall provide any information about
such a transfer as may be requested by the Company or an Affiliate in order to
assist it in complying with tax laws. Such dispositions generally are treated as
"disqualifying dispositions" under Sections 421 and 424 of the Code, which have
certain tax consequences to participants and to the Company and its Affiliates.
18. Effective Date of Plan.
The Plan shall become effective upon the adoption of enabling resolutions
by the Company's Board of Directors (the "Effective Date"), but no rights
granted under the Plan shall be exercised unless and until the Plan has been
approved by the shareholders of the Company within 12 months before or after the
date the Plan is adopted by the Board or the Administrator, which date may be
prior to the Effective Date.
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<PAGE> 34
DETACH HERE
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HADCO CORPORATION
Proxy for Annual Meeting of Stockholders, March 4, 1998
PROXY ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Horace H. Irvine II and Andrew E. Lietz, and each
of them, proxies, with full power of substitution to vote all shares of the
stock of the Corporation which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of Hadco Corporation to be held on Wednesday, March 4,
1998 at 10:00 a.m. at 100 Federal Street, Boston, Massachusetts, and at any
adjournments thereof, upon matters set forth in the Notice of Annual Meeting of
Stockholders and Proxy Statement dated January 15, 1998, a copy of which has
been received by the undersigned. The proxies are further authorized to vote, in
their discretion, upon such other business as may properly come before the
meeting or any adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR FIXING THE NUMBER OF DIRECTORS AND THE
ELECTION OF DIRECTORS AND FOR THE PROPOSALS IN ITEMS 2,3 AND 4.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
-----------
SEE REVERSE
SIDE
-----------
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<PAGE> 35
<TABLE>
<S> <C>
DETACH HERE
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Please mark your
[X] votes as in this
example.
(continued from other side)
1. To fix the number of Directors at eight and to elect a Board of
Directors for the coming year.
Nominees: Horace H. Irvine II Andrew E. Lietz, Oliver O. Ward, 2. To approve the Hadco Corporation FOR AGAINST ABSTAIN
Patrick J. Sweeney, Lawrence Coolidge, John F. Smith Employee Stock Purchase Plan [ ] [ ] [ ]
John E. Pomeroy, and James C. Taylor of November 17, 1997.
FOR WITHHELD
[ ] [ ]
3. To approve an amendment to the FOR AGAINST ABSTAIN
--------------------------------------------------- Corporation Restated Articles [ ] [ ] [ ]
For, except vote withhold from the above nominee(s) of Organization to increase
the number of authorized shares
of Common Stock from 25,000,000
shares to 50,000,000 shares
4. To ratify the selection of FOR AGAINST ABSTAIN
Arthur Andersen LLP as auditors [ ] [ ] [ ]
for fiscal year ending
October 31, 1998.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
If signing as attorney, executor, trustee or guardian
please give your full title as such
Signature: ________________________ Date: _______________ Signature: ________________________ Date: _______________
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</TABLE>
